You might expect John Roth to have an upbeat take on the new year. After all, he managed to outdo the market in brutal 2011 (and over the past three and five years).
But like many other investors who are normally bullish, he is hardly predicting good times.
“The last couple of weeks have been challenging. This month has been challenging,’’ said Roth, who manages the $1.8 billion New Millennium Fund at Fidelity Investments in Boston.
How is he feeling about 2012?
“The consensus view is somewhere between cautious and outright bearishness.’’
Roth, 42, is favoring the best US companies and multinational corporations, he said, along with “unique growth stories.’’ But it is hard to escape the big economic picture, he said, which has so dominated the investment world since the financial crisis.
“There’s a lot of macro-driven volatility in the market,’’ Roth said, citing challenges in the United States, Europe, and China. “It’s very complex. It’s been volatile, and, I think, a difficult market for a stock picker to navigate.’’
His fund was up 1.8 percent for 2011 through Wednesday, while his benchmark, the Standard & Poor’s 500 index, was essentially flat. Looking ahead to the next 12 months, he sees plenty of danger globally that he will need to skirt, and he still worries about the US economic recovery.
Still, “I’m probably most optimistic about the US,’’ Roth said.
That’s because the big banks here have mostly taken their medicine, he said. They have restructured and had the benefit of billions of dollars of liquidity injected into the system by the government.
US corporations also are in relatively good shape, he said, sitting on piles of cash.
He especially likes companies that have US customers, since the economy is stronger here than in Europe and other parts of the world that are struggling. Even some very strong US companies will find themselves vulnerable, he said, if they have to rely on global sales.
“I’m more interested in US-centric companies,’’ Roth said.
He thinks there will be opportunities in software, with innovations like cloud computing gaining ground and many companies looking to save on overhead with technology.
He is also optimistic about biotech, where developments tend to come along regardless of how the economy is doing. Some recent big drug launches and acquisitions are examples of events that can pay off for investors, he said.
The “nirvana case,’’ in Roth’s view, is finding companies that can perform well even when the global economy is unsteady. Beyond that, he said, it’s better to find good companies with underpriced stocks than to try to make bets on the economy, where it is difficult to have an edge.
Large companies that have stable businesses and pay dividends are also attractive, Roth said, because they add income to returns. Smaller companies he is interested in tend to be consumer- and technology-oriented, “companies that have found something that resonate with people.’’
Roth doesn’t see sun on the horizon any time soon. He says the government will eventually have to pull back spending and impose greater financial austerity. That will be likely to have an impact on companies, in the form of higher taxes and other measures. The political landscape only adds to the layers of questions, he noted.
Even if it doesn’t help him navigate the markets in the near term, Roth said, “We’re watching very carefully what happens in Washington.’’